What is an Employer Of Record? A Complete Guide

Expansion and attaining a global presence is one of the natural and savvy moves that any growing business could ever take. Hiring international talent is also a great way to ensure you are reaching out to new foreign markets. However, to do this successfully, you might require something known as a global employer of record of EOR. This guide will hence help you understand what is EOR, who is the employer, and what does EOR stand for.

Table of Contents

• What are EOR Services?
• What does an Employer of Record (EOR) do?
• Responsibilities of an Employer of Record
• Pros and cons of Employer of Record Services
• What are the Alternatives to an EOR?
• Steps to Choosing the Right EOR Service Provider 
• How much Does EOR costs?
• Final Words
• Frequently Asked Questions (FAQs)

What is an EOR?

Now that you have started on this journey where you want to discover more about an EOR, you might be wondering what is an EOR or what is employer of record. To understand this, you must first understand what does EOR stand for. EOR is an abbreviation for a more commonly called Employer of Record, which allows organizations to legally engage with employees across all international borders. This can be done without having to set up a local entity or risking any violation of local country or state employment laws. You could also think of a global EOR as an international HR team that helps understand complex labor laws and payroll regulations based on the different markets that your workplace is located in.

Employer of Record (EOR) Meaning

When you go to check the employer of record or EOR meaning it is considered to be a third party organization that becomes your complete legal employer of the workforce. It also assumes all employer-related responsibilities and tasks on behalf of your organization.

An EOR takes on the organization’s HR responsibilities and onboards, pays, and manages your employees while you maintain and control the daily operations.

What is an Example of an EOR?

An EOR located in India, for example, could help hire employees locally on behalf of a company that is based out of the United States. The employees would work locally in India for the company that has its headquarters in the United States, while the legal responsibilities of the employment would lie with the EOR in India.

Suggested Read: Employer of Record Services India- The Ultimate Guide 

Evolution of Employer of Record (EOR) as a Business Model

Employer of Record or EOR has surely emerged as one of the most refined business models in the evolution of employment arrangements. To date, EOR is considered to be one of the most economical employment arrangement models that has transformed various ideas and practices of international hiring models.

So, if you are still thinking about what is an EOR, well, the birth of EOR as a business model has resulted in the interconnection of the world. This has been proved by technological advancements and a globalized economy.

The rise of hiring staff in the 1960s drastically changed the way the traditional process of employment became quite popular in the West. Hiring third-party agencies who were well-versed in recruitment was a profound transformation. Businesses hence learned that there could be a lot of time and energy saved if they rely on expert advice.

What are EOR Services?

EOR service has come a long way since its start, which could be actually traced back to the 1960s. The first EORs allowed US organizations to hire across state lines by outsourcing certain employer functions to third parties. While initially it was only focused purely on payroll processing, they gradually expanded into comprehensive HR management roles.

1. Payroll Services

One of the primary services that is of main interest to most employers would be payroll services. An EOR provides full support in payroll processing by including the following tasks:

• Accurate calculation of employee salaries while also considering various components such as allowances, base pay, and deductions.
• Timely disbursement of salaries to employees in local currency
• Generating payslips and other payroll-based documents
• Withholding and remitting applicable taxes such as professional tax and income tax.

By handling the payroll processing an EOR ensures that the employees related are paid accurately and on time while also adhering to the tax rules.

2. Compliance & Legal Support

With a complex web of labor laws and regulations that vary from country to country and state to state it could be hard to track all of them down. However, with an EOR, it is possible to ensure compliance with all of these laws while also ensuring the following:

• Working hours and overtime regulations
• Minimum wage requirements
• Termination and severance policies
• Maintenance of employee records and registers
• Leave policies such as maternity leave, sick leave, earned leave, etc.
• Compliance with industry-specific rules and regulations.

3. HR Administration

EOR usually provides comprehensive HR support along with employee management services such as

• Recruitment and onboarding assistance
• Employee grievance assistance and dispute resolution
• Performance management and appraisals
• Employee handbook and policy development
• Employment contracts and documentation
• Maintaining employee records and files

An Employer Of Record hence acts as an extension of the client company’s HR department, where they handle day-to-day employee management tasks and ensure a smooth employment experience.

4. Provision of Employee Benefits & Its Administration

EOR also tends to manage the employee benefit administration, which usually includes the following:

• Gratuity management and payouts
• Health insurance and other medical benefits
• Employees’ state insurance enrollment and contributions
• Provident fund contributions and management
• Statutory and supplementary benefits

By handling the employee benefits administration, an EOR ensures that employees receive the benefits that they are entitled to while also relieving the client company of any administrative burden.

5. Risk Mitigation & Insurance

Using an EOR could help mitigate risks that are related to worker misclassification, where the employee is recorded as an individual contractor or vice versa. Such misclassification could also lead to multiple legal complications and penalties. It also looks after various insurance benefits of an employee, such as ESI or employee state insurance, health insurance, accident, and life insurance.

6. Tax Support

Working with EOR is one of the easiest ways to comply with international tax laws. EORs tend to maintain an entity in the country from which you have hired your employees that helps understand the law better. They also assume responsibility for compliance while also taking care of the following things:

• Developing competitive benefits packages that comply with local standards and laws
• Issuing payroll in local currency
• Calculating and submitting payroll taxes
• Classifying employees for tax purposes.

7. Immigration Support

Management of visas and work permits is crucial for expats which also requires timely and accurate submissions. An EOR service provider usually ensures the following:

• Whether the documentation is in place
• Employees have the legal right to work or not
• Extensions and renewals are handled to maintain compliance with local rules and regulations.

8. Employee Relations & Support

One of the very important EOR services is to ensure there are positive employee relations by providing ongoing support throughout the journey. They also handle the following things:

• Better conflict resolution
• Improved communication
• Enhanced work-life balance
• Broad career development opportunities.

What does an Employer of Record (EOR) do?

The tasks that an EOR takes on could vary a lot from each service to service along with the location in which they are located. Here are a few of the tasks that an Employer of Record usually takes up.

1. Ensures Compliance With Local Employment Regulations While Hiring Talent

An EOR will support and guide a business to ensure that the employees hired are in accordance with the local laws in every jurisdiction or country and provide them with compliant employment contracts. As the EOR is the employer, the business can rest easy while knowing that all the ins and outs of legal stuff have been taken care of. But if you are wondering who is the employer when you take over an EOR then that would be the third-party employer of record organization that you work with.

2. Carries Out Swift Onboarding of New Employees

Once the business has found its new hire, it is now time to onboard the employee. However, the employer would not need to worry about this part since the EOR will help onboard them while managing the employment agreement. They also help by setting up the necessary processes for the new team member to get started in the company.

3. Takes Care of Payroll Run Globally

Payroll and local taxes for both the employer and employee will be completely managed by the EOR. The business’s team members will be paid by the EOR. They also receive the payslips every month from the EOR. They tend to handle the calculation of taxes, deductions, or changes that need to be made.

4. Administers Employee Compensation & Benefits

EORs often offer a number of benefits that could vary from service to service. Benefits mainly include time-off policies, health insurance, parental leave, etc.

5. Handles Contract Terminations of Employees

When an employee’s contract has been terminated, the EOR will help by handling all the necessary details of the termination.

IP Protection With EOR

Despite there being many advantages to hiring globally, employers are finding it hard due to a lot of risks involved with the company information. With company data being stored in clouds and shared among global teams, ensuring data security and intellectual property has become quite a challenge. IP or intellectual property refers to any creation in your mind that could be a product development, idea, or invention. While these are intangible, these concepts are considered to be tradeable hence, they count as legal property.

In a business, intellectual property includes any intangible asset that has been owned and protected by either an individual or an organization that any third parties cannot use or implement without the consent of the owner. Intellectual property protection matters no matter how big or small the size of the company is since its services and products help make it stand out from the competition while gaining more customers and investors.

Protection of IP is, hence, one of the very important factors that comes around when you recruit new people from other countries. In order to preserve your confidential information and guarantee that you have the rightful ownership of your own work, leading EORs have created and implemented various IP protection techniques.

Detailed Functions of an EOR

By entering into employment contracts with your international employees on your behalf, EORs help by hiring across multiple countries without you having to set up an entire legal entity for employment. While acting on behalf of the employer, there are a few of the functions that an EOR tends to take over. Here are a few of them.

Management of payrolls

The EOR undertakes the process of negotiating the compensation for employees and pays the employees through its local bank account. It is the responsibility of the EOR service to ensure there is proper application of the correct taxation framework in accordance with the country’s local laws. 

Management of benefits and perks

Being in the same geographical location, it is easier for the EOR to understand more about the parka and the benefits that locals should attain. This ensures that your workforce has better access to all the employee benefits that are most beneficial to them.

Connecting with the local ecosystem

An EOR solution tends to give you direct access to the right resources within a specific geography. This includes the right recruiting and outsourcing partners along with legal and financial consultants along proper workspace management.  

Ensuring compliance with labor and employment laws

Every country has its own set of laws by which the employment is governed. Well-versed with the legal regime of the country, the EOR ensures due compliance with all of the employment laws.

Suggested Read: EOR India- A Detailed Guide on Employer of Record 2024 

Responsibilities of an Employer of Record

As mentioned before, EOR tends to handle all the HR activities, taxation, payroll, legal issues, compliance, and benefits for your global team members. However, these responsibilities could highly vary based on the company, as can the way in which your EOR provider handles these duties on your behalf.

EOR Responsibilities 1- Legal and Compliance

Local labor tends to change way too frequently and vary from one location to another. Hence keeping up with all of them could be a rather daunting process. For instance, your internal HR department would have to juggle overtime rules, minimum wage laws, leave policies, and other labor-related regulations in every region where you have your staff located. EORs help companies stay up to date with all of these evolving regulations while also staying compliant with them. This minimizes any potential legal problems.

EOR Responsibilities 2 – HR and Payroll Management 

The EOR model handles performance management, employee onboarding, and contract termination on behalf of the human resource team when advised to do so by your company. This is usually based on the contract terms and local laws when necessary. The EOR also processes and funds employee salaries, deductions, and withholding of taxes and benefits management. This process is usually monitored by the parent company’s guidelines and wishes based on local regulations and customs.

EOR Responsibilities 3 – Infrastructure and Expansion

Speed to market is very important in today’s fast-paced business environment. Setting up a legal entity in a foreign country could be time-consuming, often one that takes several months to complete. This delay could highly hinder your expansion efforts and give your competitors a better headset. An EOR could, however, significantly reduce the time required to enter a new market. By using EOR’s established presence and infrastructure, it is possible for your business to begin operation in a new country within just a few weeks rather than months.

Pros and cons of Employer of Record Services

Hiring across borders becomes quite easier if you have the right global recruitment partner. An employer of record tends to help you hire superlative talent all across the world without having to spend a fortune. Let’s take a look at a few of the pros and cons of the employer of record services.

1. Global Talent Access

Although there are many advantages when it comes to global teams, a lot of business owners are quite hesitant to hunt for talent abroad due to a lot of difficulties involved in establishing a legal company in a new country.

Government approvals could take a lot of months, which means that companies would have to wait for a long time to begin their commercial operations overseas, especially in nations where there is a high degree of bureaucracy. Additionally, by undertaking the responsibilities of payroll and tax management, an EOR further enhances the usability of hiring global talent.

2. Prevents Breach of Legal Regulations & Compliance Risks

International enterprises usually experience costly litigation due to failure to understand local trade and labor rules. Due to the ignorance of the legal complications, a business owner may find themselves in a huge mess. Companies hence rely on EORs to steer clear of such circumstances and manage the teams in such a way that it complies with the law. EORs will ensure that all corporate employment procedures are compliant since they have a thorough understanding of both business and labor laws

3. Speeds Up Global Expansion

EORs could significantly speed up a company’s global expansion efforts. They also offer a quick way to employ staff in new markets without having the requirement of a new legal entity. This, in turn, helps accelerate the go-to-market timelines and facilitates a rather swift growth. 

5 Reasons to Choose EOR Over Outsourcing

Unlike in outsourcing, EOR agencies do not have a ready-made team for all services instead they build a fresh team based on each business needs. The following are 5 reasons why you need to choose EOR over outsourcing.

Direct control of the team

In EOR, businesses directly tend to engage in team selection along with having the liberty to choose the right candidates as per their requirements. The employer of the record company hence assists organizations in finding a suitable pool of talent based on the job descriptions using its network and resources.

Minimal chance of any inappropriate team member selection

Since the overseas company personally handles the recruitment process of its candidates through EOR assistance, there is minimal chance for the organization to make the wrong selection of the team. Even the least experienced organization could minimize the risk to their team by using the right strategy from EOR services.

Zero risk of data breach and IP infringement

In EOR, the risk of IP violation or security breach of the client is almost equal to zero, as one team will be working only for a single client. Once the task has been completed, the team could be dissolved or converted into a physical entity of the overseas organization. Also, EOR does not require hiring any subcontractors, which is quite a common practice in outsourcing.

Effective communication and fair employee benefits

Contrary to outsourcing, businesses tend to get direct access to the team, and hence, there is better communication between both parties in the EOR model. The overseas company could easily reach out to its employees directly and even get up-to-date information about their work progress. Businesses could get all information about their employees’ payroll, attendance status, benefits, etc., through EOR’s dashboard.

Building the team around a chosen superior

Many times, an organization has a senior experienced resource and would want him or her to lead the team by relocating. With an EOR agency, you can easily build a team around such a senior leader. 

Why Use an EOR?

Partnering with the right EOR could actually serve as a valuable foothold in the global market. This allows you to get access to the talent you need without having to force you to manage piles of paperwork and bureaucracy. Here are a few other reasons why you should use a global EOR.

Automatic contract generation

Employment contracts are mandatory in a lot of countries. However, creating a contract could be lengthy and complex. A trusted EOR partner would be able to help you in this matter by generating an automated contract and managing all the terms, ensuring they are tailored to the needs of each of the employees.

Provide benefits for your team

EORs handles benefits administration. This includes contributions to government programs such as workers’ compensation and social security. EORs could provide competitive benefit packages that meet local expectations and labor laws.

Payroll made easy

With most of the workforce transferring to remote work, a lot of organizations are realizing how complex payrolls could be. Especially with different currencies, tax, and labor laws, there could be a lot you might be dealing with. When you work with an EOR, you are no longer responsible for the understanding or managing of such complexities, which gives you time to focus on core elements.

Why Should Your Organisation Consider Using an Employer of Record?

How we used to manage employment and work around it has changed profoundly. Whether you are looking to expand globally without the administrative and legal burden or need to streamline your workforce management the concept of using an employer of record has become increasingly relevant. 

1. Address Workforce Gaps

You deserve to have the right talent working for your company especially since you need to have the right people who can fill the crucial roles to help your company succeed. While you could settle for those who are in the same city or even state as you wish and hope that you find the right talent, you could even bridge this workforce gap by reaching out to a global market.

2. Resolve Time & Resource Restrictions

It takes a lot of time to manage the paperwork associated, handle benefits and office administration, process the paychecks, and end employee contracts. Business owners who try to handle dozens of management responsibilities on their own usually end up not devoting enough time to the company’s essential processes. These processes involve developing strategy, cultivating deep relationships with customers or partners, and enhancing the product. Instead of spending hours managing all of this, you may want to partner with an EOR where you get to give up on the measly administrative work and instead focus on the important processes.

3. Ensure Compliance & Adherence to Local Laws

The risk of non-compliance with employment laws could lead to hefty fines and could even damage your business’s reputation. An employer of record, however, provides a sigh of relief by taking on the responsibility for legal compliance related to employment. This, in turn, reduces the risk of legal issues and ensures that your business stays on the right side of the employment laws. With their expertise, EORs could also navigate you through global employment rules and regulations. They would also provide expert advice and updates on the legislative charges.

Is Opening an Entity in a New Country Easier than Using an EOR?

The answer to this question will depend on a lot of different factors. Companies that could benefit from establishing an entity include the following:

Seek name recognition

Suppose your business is trying to grow its brand in a new market then an entity is definitely the way to go. This is the best option since it points to your company making a larger investment in that location and helps you stay there for the long haul. 

Hold fixed assets

If the nature of your business is such that it requires a fixed asset, such as a fleet of vehicles or a warehouse, then it would be better to establish a new entity in the market.

On the other hand, if your business wants to acquire the following goals then an EOR would be the right fit.

Quickly establish your presence in another country

Businesses could onboard new employees in as little time as a day. This helps to establish your presence in another quickly within days or weeks without having to invest more.

Keeping your costs down

It costs a lot to employ a worker via an entity as compared to when you use an EOR. An entity itself requires a lot of investment upon which you need to invest in the employee as well.

Avoiding compliance risks

As the official employer of international talent, your EOR will assume the risks associated which also include the potential contractor misclassification.

What are the Alternatives to an EOR?

If you do not want to use an EOR to hire international workers, then you are left with majorly two major options such as hiring contractors or establishing your own local legal entity.

Hiring global contractors

This option could be a great way to grow your business or handle time-sensitive tasks without having to onboard new employees in your organization. However, if you treat your contractors like employees, this could create a significant misclassification risk. It is, hence, important to be aware of such risks and to understand how to avoid them.

Establishing an independent local legal entity

To establish a new local legal entity then, you must file the proper paperwork with local authorities and prove your case as a registered business. Each country where you might want to set up would have its own set of requirements, which could include having a certain number of employees or even constructing an office in the country.

EOR vs PEO: What is the Difference Between Employer of Record and PEO?

PEO is also called a Professional Employment Organization. Often there are various employment requirements that could vary significantly from state to state or region. For smaller organizations, in particular, meeting with all of these rules is too difficult. This is where PEO comes in handy. Rather than taking over the entire legal employment role, a PEO company co-employs teams alongside you. They only assume the duty of the administration of the payroll, benefits, and HR support which leaves you to focus on your core business.

EOR and PEO companies, however, fundamentally do the same things. They employ individuals on their infrastructure and manage the HR, payroll, and benefits. And you get your work delivered by the people you want regardless of which place they are located in. Here are two major differences between EOR vs PEO.

Service offerings

One of the key differences between EOR vs PEO can be observed in their range of services provided. EOR services primarily focus on HR tasks and compliances. PEO services on the other hand generally provide a broader selection of services such as risk management and strategic HR planning.

Legal Responsibility

Another key difference between EOR and PEO can be observed in their legal responsibility for the employees. An EOR takes full legal responsibility for employees and completes the task on behalf of the client company. Whereas a PEO tends to share legal responsibility with the client company and hence enter into a co-employment arrangement.

EOR vs Staffing Agencies: What are the Differences?

While both EOR and a staffing agency is related to each other they are quite different from one another. An employer of record focuses mainly on the liabilities and tasks that come once an employment offer has been made and has been accepted. A staffing agency on the other hand is mainly responsible for sourcing employees. This also includes posting job positions, finding and interviewing candidates along negotiating of offers.

While some organizations use one vendor to fulfill both their staffing and employer-of-record services, there are others who source candidates in-house and then hand them over to the employer of record to help them onboard and maintain their payroll.

EOR vs HR Software: How Does an EOR Differ from an HR Software?

Relying on an in-house HR for employee management makes sense when all or most of your employees belong to the same jurisdiction. However, even if a small number of employees are from overseas, relying on in-house HR software would become a strain as each country comes with its own set of requirements. While in-house HR software could handle the overseas employees, they would require a lot of time and money being put in.

An EOR, on the other hand, is an external partner who is ready to take on the administrative workload and provide the organization with cross-border employee management. It also takes over the important work of complex legal, payroll, and administrative work, thus helping organizations to focus on what helps them grow. The choice between an EOR and HR software will usually depend on the company’s global expansion needs, legal considerations, and preferences for HR management.

EOR vs Payroll Solutions: Key Differences

Payroll solutions are services used by organizations that have already hired their employees and just require assistance with their payroll. Such solutions can be purchased from payroll vendors or software organizations that provide cloud-based HRMS software for managing employee analytics and information.

The main difference between EOR and payroll solutions is that one focuses on administrative responsibilities, such as processing paychecks on time, whereas the other one handles HR processes for both employees and employers.

Steps to Choosing the Right EOR Service Provider  

If you are ready to take the next step, the only question that is left for you is figuring out which EOR you want to choose and how. There isn’t any lack of EORs out there and they all provide various quotes and services. While there are lots of options it is important to go for the one that will provide you services based on your business needs. Here are a few of the major things you need to keep in mind when you check for the features of the EORs that will fit your needs.

1. Cost and Transparency

When trying to compare a few of the EOR companies you might want to select an EOR that is transparent about its costs. They might add a few setup fees, taxes, or cancellation fees based on the initial estimate. They may also later on introduce hidden fees and surcharges which could create a change in your budget and have an effect on a lot of departments inside your business. Make sure you request a complete breakdown of the price from the prospective EORs upfront. This will ensure there is transparency in the costs and communication without any additional costs being added.  

2. Expertise and Experience

Choosing an EOR provider with expertise and experience in your specific industry is very important to ensure that there is a proper understanding of your business needs and the unique requirements of your sector. An EOR with industry expertise will have invaluable insights into the complexities and challenges associated with your industry. This enables them to deliver much more effective solutions and services that could be tailored to your business needs.

3. Service Offerings

Choose an EOR that offers a multitude of services that are tailored to your specific requirements. The ability to adapt and provide customized solutions is essential for retaining efficiency and achieving your expansion goals. With a good EOR choice, you could focus on the core business without having to worry about the complexities of global expansion. As your dedicated EOR partner, you will also get a wide range of EOR solutions, such as payroll management, permits, entity setup, and value-added services. You will also get a team that is committed to providing you with seamless, customized solutions that will cater to all your requirements.

4. Customer Support

Excellent customer support is an essential factor when you consider selecting the right EOR provider. A provider with efficient and responsive customer support will ensure that all your concerns and queries are addressed immediately. This allows for smooth communication and effective problem resolution. You might want to look for an EOR that has multiple communication channels. These could include phone, email, live chat, social media, and self-service support. This is to ensure that your needs are met and things run smoothly in the long haul.

5. Scalability and Flexibility

One of the major factors that affect which EOR you need to choose is the scalability and flexibility that your EOR partner could provide while entering new markets. From the contract process to onboarding, an EOR partner could have you set up in a new market within just a matter of a few days. This is significantly quicker, along with being cheaper than the months that it would take to set up your own local entities in new markets. Depending on the requirements of your business, the EOR service provider should also be able to offer flexible solutions to adjust to your changing business requirements. Whether you are hiring a single employee or 100, an EOR partner should help you scale your operations up and down as per your requirements.

6. Compliance and Risk Management

Not all global employment providers can take proper care of international compliance. Always do your due diligence to check the EOR’s industry reputation in terms of following the compliance rules. Navigating through the complex landscape of global employment regulations and rules is a very hard task. A reputable EOR hence should be selected where you have legal experts who are well-versed with the labor laws. They should also stay updated with all the changes or new regulations that are being added which may affect your operations.

7. Reputation and References

You might want to read reviews on unbiased websites and get in touch with the references to see whether the current clients of the EOR are happy with the way the company is providing them services. Asking a potential partner for references from businesses that have goals and characteristics that are similar to yours, such as industry, budget, and types of people they work with, is also quite beneficial.

8. Global Network and Support

Selecting an EOR service provider with an extensive global network is crucial to support your international plans. A provider with a strong international presence could help you navigate the complexities of local employment rules and regulations within multiple countries. This ensures that your business remains compliant and can access the best talent all around the world.

Also, having a single EOR provider with global coverage will simplify all your administrative processes. Instead of having to deal with multiple EORs and legal entities in various countries, you could have a centralized HR, payroll, and compliance management solution all across various locations.

9. Technology and Integration

The rewards of a seamless transition and an efficient operation are absolutely priceless. Look out for an EOR that will utilize cutting-edge technology and systems, especially for HR, payroll, and compliance. Ensure that they can easily integrate along with your existing system so that you get the rewards of streamlining operations.

10. High Data Security Standards

When outsourcing employment-related functions to an EOR service provider confidentiality and data security is very important. Inquire about the provider’s data protection measures including access controls, encryption protocols, and compliance with data privacy rules such as GDPR. Ensure that they have robust security practices in place so that you can safeguard your employee’s sensitive information.

Suggested Read: Independent Contractor Management- The Ultimate Guide 

When to Use an Employer of Record (EOR)?

Now, finally, it comes down to the part where you decide when to use an employer of record, even if you choose to work with one. You can start by analyzing your situation and see if any of the below-mentioned cases match your condition. If they do, then an EOR would be the best fit as a solution.

1. Try Out New markets

Not every foreign market would turn out to be suitable to a business’s services. Hiring local employees through an employer of record gives expanding businesses a lot of time to get to know the local customer base while also validating their market expectation before committing to it. Should the local conditions do fall short of the business’s expectations withdrawing from the new market will become a lot easier since there is no legal entity present.

2. Ensure Proper Compliance Management

When it comes to labor laws, tax obligations, and employee perks, each country tends to handle them all differently. That’s where you require a compliance officer or an employer of record who can help you. With the help of their in-depth understanding, it is possible to manage compliances while also reducing any risks when hiring new employees in different countries.

3. Flexible Workforce Management

Remote work has opened up a lot of opportunities for employees to work from wherever they would like. Working with an employer of record helps the team members to relocate to different locations which could be a game changer especially when you try to retain talented workers. An organization’s global mobility strategy can benefit from EOR solutions.

4. Prevent Misclassification of Contractors

Due to the fact that local laws frequently have precise definitions of who is an employee vs contractor a firm may be exposed to misclassification concerns if it chooses to hire overseas contractors rather than employees. It is the responsibility of an EOR to give proper direction and management ensuring that the employees are categorized properly and that your firm continues to comply with all the rules.  

How much Does EOR costs?

Most of the EORs usually use either a flat fee or a variable pricing model. Here’s a bit more information regarding the costs of various EOR providers.

Variable EOR pricing

A variable pricing model charges a percentage of your employee’s monthly salary. Under this model, the amount of your pay will depend on how your worker earns. if you have low-paid employees this solution could be considered to be cheaper than a flat pricing model. However, as your employees earn more your EOR expenses could also increase. This model discourages wage increases which could make your company less competitive, especially in talented areas. Remember that valuable pricing means your fees are subject to change based on the decision of the EOR provider. In general, this model is quite unpredictable and less desirable than a flat pricing model.  

Flat fee EOR pricing

The flat fee model usually involves a single fee per employee, usually charged either on a monthly or an annual basis. Paying annually is considered to be cost-effective while paying monthly could provide better flexibility. You get a lot of advantages when going for flat fee pricing. For example, you can employ as many people as you would like to at any salary, and the bill will never change based on how much you pay your employees or what benefits you choose to offer. This is one of the most preferred options for a lot of organizations.

Which Countries are Employer of Records Present in?

EORs cover major markets across the world. It can help you onboard hire and amange employees in around 150+ countries. Here are a few of the countries that have major presence of an EOR.

• India
• Netherlands
• United States of America
• Canada
• France
• Brazil
• United Kingdom
• Egypt
• South Korea
• Malaysia

Future Trends in EOR

The EOR definitely plays quite a vital role in modern business. EORs have significantly contributed to the range of services provided. Here are a few of the trends that are shaping the future of the EOR industry.

Customized EOR services

Customized EOR services are much more in trend than before. Businesses are now seeking to differentiate themselves in a competitive market, which may require unique solutions that meet their needs. EORs could also provide this by offering tailored HR solutions to meet each of the unique needs of the clients. They also tend to save money even if you choose to customize your solutions.

Focus on compliance and risk management

The EOR industry focuses on compliance and risk management as HR regulations tend to change frequently while also becoming more complex. EORs must also be vigilant about their clients complying with the rules. Failure to comply will result in damaging the company’s reputation. Managing risks for their clients would also be important.

Technological advancements and automation

The role of technology in EOR services advances in automation and digitalization has transformed the way EORs work. It has also made it easier to manage HR functions more efficiently. For example, now EORs are using various platforms to manage benefits administration and payroll which allows them to automate a lot of tasks and reduce the risks.

Final Words- Employer of Record

Using an employer of record or an EOR could provide you with immense strategic and operational benefits, especially for those organizations that seek to hire global talent. For today’s global business environment, partnering with a reputable EOR could also provide better talent access. You also additionally get compliance expertise, which helps you grow and compete on a worldwide scale. As long as the EOR has been thoroughly evaluated, it is a minimally risky effort with a lot of major upsides.

Faqs

1. What is an Employer of Record (EOR)?

An EOR is an entity that takes on multiple functions on your organization’s behalf. These services usually include tax compliance, risk management, payroll, and benefits administration.  

2. How does an EOR differ from a Professional Employer Organization (PEO)?

An EOR employs workers on behalf of their clients’ companies without requiring them to open an entity, whereas a PEO, on the other hand, handles HR functions for businesses that already have their local entity.

3. What services does an EOR typically provide?

An EOR typically provides the following services:

• Deducting taxes
• Mandatory social contributions
• Payroll processing
• Local tax filings

4. Why would a company choose to use an EOR?

A lot of companies opt for EORs since they ensure that the payroll is compliant with the laws and regulations of the country.

5. How does an EOR facilitate international hiring?

An EOR facilitates international hiring by handling everything related to administrative tasks, payroll, and compliance.

6. What are the legal responsibilities of an EOR?

The legal responsibilities of an EOR include compliance management, payroll management, contract creation and termination, employee benefits, and employment law compliance.

7. How does an EOR ensure compliance with local labor laws?

An EOR ensures compliance with local labor laws by conducting regular audits. They need to stay agile and update themselves about the changes in the local regulations. This also includes examining their practices, procedures, and policies.

8. Can an EOR handle payroll and tax obligations?

Yes in fact payroll is one of the main functions of an EOR. They hence handle both tax obligations and payroll for their clients.

9. What types of companies benefit most from EOR services?

Companies that are usually small in size or those that do not have an established human resources department may find that an EOR would be a great option. Also, since it handles all the administrative tasks.

10. Are there any industries where EOR services are particularly advantageous?

A lot of industries could actually benefit from EOR services. This includes everything from technology and healthcare to retail and finance. These industries could enjoy the benefit of streamlined compliance, cost-effective expansion, and easy access to a global pool of talent.

11. How does an EOR manage employee benefits and compensation?

An EOR offers benefits packages that usually meet with both the local rules along with an employee’s expectations. This includes healthcare plans, retirement plans a whole range of other benefits.

12. What is the process for onboarding employees through an EOR?

An EOR handles background verification, drafts complainant employment contracts, collects identity proofs, and then sets up payroll accounts. This is all done while ensuring compliance with local labor rules and regulations.

13. How does an EOR handle employment contracts and agreements?

The EOR tends to be the legal employer, while the organization retains control over day-to-day tasks. They also look after drafting contracts, which include everything from benefits to job requirements.

14. What are the cost implications of using an EOR?

Using an EOR could provide you with two options of cost packages such as follows:

• Flat fee pricing model
• Variable fee model

15. How does an EOR assist with visa and work permit applications?

An EOR checks through the landscape of immigration by following all the rules and regulations. They also identify available visa types and assist with application processes once documents are obtained.

16. What are the potential risks or disadvantages of using an EOR?

The possible risks or disadvantages of working with an EOR include the following:

• You might feel like you have less control
• While this is a good short-term solution, it may become tedious over time.
• You will need additional time to embed your culture and goals.

17. How does an EOR manage employee terminations and offboarding?

The termination process by an EOR usually consists of the following steps:

• Reviewing the employment agreement
• Notification of the termination
• Communicating with the employee
• Calculation of final payments and benefits
• Offboarding and documentation
• Providing post-termination support

18. Can a company maintain control over daily operations while using an EOR?

Yes, a company can handle daily tasks, salaries, and performance assessments, while EORs can ensure legal compliance.

19. What factors should be considered when selecting an EOR provider?

There are multiple factors that you may want to consider before selecting an EOR provider, such as follows:

• Ease of building a remote team
• Lowering administrative pressure
• Professional expertise

20. How does an EOR support compliance with tax and social security regulations?

An EOR calculates the total tax deductions that are necessary and pay the social contributions on behalf of the employer. This is all done by reviewing the local labor laws.

Not to be considered as tax, legal, financial or HR advice. Regulations change over time so please consult a lawyer, accountant  or Labour Law  expert for specific guidance.